Non-registered activity and other situations where the company does not need to be registered
Do you run a blog, sell graphic designs, or maybe you have small sales online? You should know that if you start doing this on a regular basis and in an organised way, you will have to register your business. An exception to this rule is the so-called non-registered activity.
Non-registered activity (no need to register with CEIDG)
If you run a small business (e.g. small trade or services), you can take advantage of the provisions on so-called non-registered business and avoid the obligation to register your activity.
When I can use a non-registered activity
You do not need to register a company if:
- you are a natural person and the revenues from your activity will not exceed 50% of the minimum wage in any month (in 2019 it is PLN 1125)
- you have not run a business before or you ran it, but before April 30, 2017 your company was removed from the register of entrepreneurs and since then you have not registered it again
What are the benefits of non-registered activity?
Thanks to the new regulations, you can earn income from activity that was previously considered to be economic activity and entailed many obligations (contributions and other obligations to the Social Insurance Institution (ZUS), tax settlement method)
If you use the regulations on non-registered activity:
- you do not need to register your activity in the Register of Entrepreneurs (CEIDG), Tax Office and Central Statistical Office (you will not need identification numbers NIP and REGON)
- you do not have to pay contributions for insurance in ZUS and you do not have to submit ZUS declarations
- you do not have to pay monthly (or quarterly) tax advances
- you do not need to keep complicated accounting (only simplified sales records)
What are your obligations in the case of non-registered activity?
If you run non-registered activity, you are an "entrepreneur" under civil law. This means that, for example, in relations with consumers, you are treated as an entrepreneur and have obligations (e.g. in relation to a complaint or repair). This also applies to the consumer's right of withdrawal within 14 days from the distance contract).
Accounts for non-registered activity
A person conducting non-registered activity is in principle exempt from the obligation to issue an invoice. He/she must do so only if the request for its issue was made within three months of the end of the month in which the goods or services were supplied or all or part of the payment was received. In this case, it may be an invoice which only contains:
- the date of issue
- sequence number
- names and surnames and name of the taxable person and of the person acquiring the goods or services and their addresses
- the name (type) of the product or service
- measure and quantity (number) of goods supplied or scope of services rendered
- the unit price of the product or service
- the total amount of the entitlements
For a non-registered sale, you only need to enter your name and surname on the documents.
How to calculate revenue in the case of non-registered activity
Whether or not you can run a non-registered business is determined by the amount of monthly revenue (it may not exceed 50% of the minimum wage in any month). Your revenue from non-registered activity will be the receivables that you receive for the sale of your goods/services. Remember that you also include in your revenues amounts that are due to you even if you have not yet received them (e.g. if you have sold goods and issued a sales note but have not yet physically received payment). You do not include in your revenue the value of goods that have been returned to you or discounts and rebates granted (i.e. discounts for making payments before the due date).
You will need sales records to help you determine your revenue.
Records of non-registered sales
If you run a non-registered business, you should keep simplified records of your sales (on the basis of article 109(1) of the VAT Act). You record the sales for the day in question. Remember that you should make entries for a given day no later than before the sale on the next day (i.e. after the sale of goods the next day, you should not enter the sale from the previous day). This obligation results from the VAT regulations.
What should the register of sales contain?
The provisions do not regulate what exactly the simplified sales register should contain. It usually contains information such as
- serial number
- the date of the sale
- the value of sales
- the value of sales incrementally
You can also add other information to the register, such as the sales receipt number or information about the type of transaction.
Accurate records will help you quickly determine whether you have exceeded the income threshold for non-registered activities.
The register may be kept on paper.
You have an obligation once you have taken up a non-registered business:
- to keep simplified sales records
- respect consumers' rights
- issue invoices or bills at the purchaser's request
What are the limitations of non-registered activity?
The provisions on non-registered activity do not apply to partners in a civil law partnership.
You may also not conduct regulated activity, i.e. activity that requires special permits, concessions, etc.
How to account for revenues and costs from non-registered activity
Revenues from non-registered activities are revenues from the so-called other sources. You do not have to pay any tax advances on your income. You are obliged to settle your income in the PIT-36 annual tax return.
You can also deduct in your annual tax return expenses that you have incurred strictly in connection with your business (e.g. purchase of raw materials for the production of products).
These costs should be documented, so you should keep records of all purchases related to your business.
Non-registered activity and VAT
If you conduct a non-registered business, you are exempt from VAT. You only keep simplified records as described above.
Remember, however, that the performance of certain activities obliges you to register as a VAT payer regardless of the amount of your income. This includes jewellery, legal and advisory services. If you intend to do business in any of the above areas, you need to register as a VAT payer
Non-registered activity and fiscal cash register
In the case of non-registered activity, in most cases you will not have to use the cash register (you will not exceed the threshold of PLN 20,000 of annual turnover, which obliges you to use cash registers). It will be needed for the few types of activities where the cash register is mandatory irrespective of turnover (e.g. hairdresser, catering, car mechanic). You can find a list of services and goods subject to the obligation to use cash registers in the Regulation.
What happens if I exceed the limit for non-registered activities?
If you exceed the monthly income limit (50% of the minimum wage), your business will be considered an economic activity. Once you have exceeded the limit, you have 7 days to register your business with CEIDG. As a novice entrepreneur you will be exempt from social security contributions. Compulsory social security contributions must be taken out within six months of starting up. Then for 2 years you will be able to use the so-called small ZUS.
Other activities which do not need to be registered
Apart from non-registered activity, the regulations define specific types of activity which do not need to be registered in the office. This refers to:
- the agritourism activity of farmers
- the production of wine by farmers
- agricultural retail trade
It involves farmers renting rooms, selling home-made meals and providing other services related to tourists' stay in agricultural holdings. The farmer providing these services is not obliged to register his economic activity.
No registration shall be required in respect of the activity of wine making by producers who are farmers and who produce less than 100 hectolitres of wine per marketing year. This means that a farmer producing less than 100 hectolitres of wine per marketing year does not have to register his economic activity.
A vineyard owner intending to market a wine product must make an entry in the producers' register.
Sale from an agricultural holding (retail agricultural trade)
Sales of non-industrial processed plant and animal products (with the exception of processed plant and animal products obtained under the so-called special divisions of agricultural production and products subject to excise duty) are not subject to registration provided that:
- the sale is not made for the benefit of legal persons, organisational units without legal personality or natural persons for the purposes of their non-agricultural business activity
- processing of plant and animal products and their sale is not carried out in the case of employment of persons under employment contracts, mandate contracts, contracts for specific tasks and other similar contracts
- the products are sold only where they have been manufactured or marketed
- the quantity of plant or animal products from own-cultivation, rearing or farming used in the manufacture of the product concerned shall represent at least 50% of that product, excluding water
For an activity to qualify as an economic activity, it must also be carried in one's own name, regardless of its outcome, in an orderly and continuous manner, with a view to making a profit.
If you are wondering whether what you are doing is an activity or not and whether you should report it to the office, check if it has the characteristics of an activity. These are the features:
- income target - it is profit oriented
- being organised - your business is organized if e.g. you rent a room to conduct it, you are looking for customers,
- continuity - means that activities are undertaken continuously
- carrying it out in your own name and responsibility for it (i. e. you do not perform it on commission and under the direction of your contractor).
- incurring economic risks related to the activity.
Important! There are several definitions of economic activity and entrepreneur in the regulations (e. g. in the Act on Freedom of Activity, the Tax Ordinance, the Personal Income Tax Act). This means that if you do not" fall under the definition of economic activity or entrepreneur in one act, you may be subject to other laws (e. g. tax or insurance laws). An example is the definition of an entrepreneur in insurance legislation. According to them, a shareholder of a registered partnership is subject to the same insurance policy as an "entrepreneur", although he is not an entrepreneur under other regulations (registered partnership is an entrepreneur and not its partners).
The question of whether you should register and settle as a person running activity is particularly important in tax matters. Even if you don't think you are running economic activity, the tax office may think the opposite. If you are unsure whether you should settle as a sole trader, contact the tax office.